a guide to the local government pension scheme for employees in england … · 2017. 11. 29. ·...

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A Guide to the Local Government Pension Scheme for Employees in England and Wales

Employees in England and Wales – May 2015 V1.8

Index

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1. About this Booklet pg 5

2. About the Local Government Pension Scheme (LGPS) pg 6 Who runs the LGPS?

LGPS rules and responsibilities

3. Your Pensions Choice pg 8 Joining the LGPS

Contributions

Forms to fill in

4. Contribution Flexibility pg 18 Flexibility to pay less - 50/50 section explained

Flexibility to pay more including: o Additional Pension Contributions (APCs) and o Additional Voluntary Contributions (AVCs)

Contributing to a concurrent personal pension plan or stakeholder pension scheme

I am already buying extra LGPS membership and or paying Additional Regular Contributions (ARCs). Can I buy any extra benefits?

Can my employer award me any extra pension benefits?

What happens if I pay extra and elect for the 50/50 option?

What if I'm paying extra and I am absent from work?

Do the tax rules on pension savings limit the extra I can pay?

5. Your Pension pg 32 How is your pension worked out?

What options do I have when I draw my benefits from the scheme?

What if I am paying extra?

When can I retire and draw my LGPS pension

Voluntary Retirement

Choosing to retire and draw your pension benefits before your Normal Pension Age

Reductions for early retirement

Choosing to carry on working after your Normal Pension Age

Early retirement through Redundancy or Business Efficiency

Ill health Retirement

Flexible retirement

Your State Retirement Pension

6. Transferring Pension Rights into the LGPS pg 48 If you have previous LGPS pension rights in England and Wales

If you have pension rights in a non– LGPS arrangement

If you have pension rights with another public service pension scheme where Club transfer rules apply

I have a personal or stakeholder pension plan. Can I continue paying into it?

I have paid Additional Voluntary Contributions (AVCs). Can I transfer them

Index

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into the LGPS?

How do I transfer?

I’ve lost touch with my previous pension provider. Who can help?

7. Leave of Absence and the LGPS pg 55 What happens if I am on sick leave?

What happens if I am on maternity, adoption or paternity leave or shared parental leave?

What happens if I am granted unpaid leave of absence?

What happens if I am on strike?

What happens if I am on reserve forces service leave?


8. Leaving Your Job Before Retirement pg 60 Vesting period for LGPS pension entitlement

I'm eligible for a refund of contributions. How are these worked out?

What will happen to my benefits if I’ve met the 2 year vesting period?

How are deferred benefits worked out?

What if I paid extra?

My LGPS benefits are subject to a Pension Sharing Order. How does this affect my deferred benefits?

When are deferred benefits paid?

How do deferred benefits keep their value?

Do the tax rules on savings cover deferred benefits?

What will happen if I die before receiving my deferred benefits?

What will happen if I wish to transfer my LGPS benefits to another (non LGPS) scheme?

What happens if I change jobs but remain in the LGPS?

What if I have two or more LGPS jobs?

What happens if my job is transferred to a private contractor?

9. Life Cover – Protection For Your Family pg 74 What benefits will be paid if I die in service? What benefits will be paid if I die after retiring on pension? Who is the lump sum death grant paid to? What conditions need to be met for an eligible cohabiting partner's

survivor's pension to be payable?

10. Pensions and Divorce or Dissolution of a Civil Partnership pg 84 What happens to my benefits if I get divorced or my civil partnership is

dissolved? What is the process to be followed? What if I remarry or enter into a new civil partnership?

11. Tax Controls and Your LGPS Benefits pg 88 Are there any limits on how much I can pay in contributions? What are the tax controls on my pension savings?

12. Help with Pension Problems pg 96

Index

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Who can help me if I have a query or complaint?

How can I trace my pension rights?

13. If You Joined the LGPS Before 1 April 2014 pg 99 How are benefits worked out?

What counts towards membership in the scheme before 1 April 2014?

What counts towards final pay to work out my benefits in the scheme before 1 April 2014?


When can I draw my LGPS benefits built up before 1 April 2014?

Additional protection if you are nearing retirement.

14. Some Terms We Use pg 112

About this Booklet

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The information in this booklet is based on the Local Government Pension Scheme Regulations 2013 and the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 (both effective from 1 April 2014) and other relevant legislation. It applies to individuals who were contributing members of the Local Government Pension Scheme (LGPS) on 1 April 2014 or who have joined the scheme on or after that date. The booklet is for employees in England or Wales and reflects the provisions of the LGPS and overriding legislation at the time of publication in April 2015. In the future the Government may make changes to overriding legislation and, after consultation with interested parties, may make changes to the LGPS. This booklet is for general use and cannot cover every personal circumstance nor does it cover specific protected rights that apply to a very limited number of employees. In the event of any dispute over your pension benefits, the appropriate legislation will prevail as this booklet does not confer any contractual or statutory rights and is provided for information purposes only. The booklet explains the benefits available to you as a member of the LGPS. It describes how the scheme works, what it costs to be a member and the financial protection that it offers to you and your family. Where pension terms are used, they appear in bold italic type. These terms are defined at the back of this booklet. The national website for members of the LGPS who contribute to the scheme on or after 1 April 2014 is www.lgps2014.org.

http://www.lgps2014.org/

About the Local Government Pension Scheme (LGPS)

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Who runs the LGPS? The LGPS is one of the largest public sector pension schemes in the UK. It is a nationwide pension scheme for people working in Local Government or working for other types of employer participating in the scheme. The LGPS in England and Wales is administered locally through 90 local pension funds. The Administering Authority for the Enfield Pension Fund is Enfield Council. Contact details can be found at the end of this document. LGPS rules The scheme regulations were made under the Superannuation Act 1972 and in the future will be made under the Public Service Pension Schemes Act 2013. Changes to scheme rules are discussed at national level by employee and employer representatives but can only be amended with the approval of Parliament. Your administering authority must keep you informed of any changes that are made. The LGPS is a registered public service pension scheme under Chapter 2 of Part 4 of the Finance Act 2004. It achieved automatic registration by virtue of Part 1 of Schedule 36 of that Act (because the scheme was, immediately before 6 April 2006, both a retirement benefits scheme approved under Chapter I of Part XIV of the Income and Corporation Taxes Act 1988 and a relevant statutory scheme under section 611A of that Act). This means, for example, that you receive tax relief on your contributions. It complies with the relevant provisions of the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004. The LGPS meets the government's standards under the automatic enrolment provisions of the Pensions Act 2008. LGPS responsibilities Information Your administering authority is required to:

issue annual benefit statements to scheme members (other than to pensioners).

have a statement setting out their policy on communicating with scheme members, members’ representatives, prospective members and employers.

You are entitled to obtain a copy of the Local Government Pension Scheme Regulations 2013 (Statutory Instrument Number 2013 No. 2356) and subsequent amendments and the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 (Statutory Instrument Number 2014 No. 525). The regulations are available from The Stationery Office. A current version, including all amendments, is available on the website www.lgpsregs.org. A copy of the Regulations may be inspected at the Fund’s offices, contact details can be found at the end of this document. In addition, you are entitled to view, and take copies of, the Fund’s Annual Report and Accounts.

http://www.lgpsregs.org/

About the Local Government Pension Scheme (LGPS)

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To maintain the security of any information about you, your administering authority is registered under the current Data Protection Act. You can check that your computerised personal record is accurate, although a small fee may be charged. Decisions The Regulations give specific responsibilities to employers and pension fund administrators, each of whom must make decisions in relation to some matters and can exercise their discretion in relation to others. Many pension fund administrators set up a Pension Committee to oversee their pension scheme responsibilities which then acts in a similar role to trustees of other pension schemes. You can find more information from the Enfield Pension Team, who act as the Schemes Administering Authority, contact details can be found at the end of this document. Governance From April 2015, your administering authority must establish and operate a Local Pension Board. The Pension Board is responsible for assisting the administering authority in securing compliance with the LGPS regulations, overriding legislation and guidance from the Pensions Regulator. The Board is made up of equal representation from employer and member representatives. Funding As a scheme member, you will pay contributions to the LGPS. Your employer currently pays in the balance of the cost of providing your benefits after taking into account investment returns. Every three years, an independent actuary calculates how much your employer should contribute to the scheme. The amount will vary, but generally the present underlying assumption is that employees contribute approximately one third of the scheme's costs and the employer contributes the rest. Future cost management of the LGPS To ensure the long term sustainability of the scheme a cost management process is now in place in the LGPS in England and Wales which will monitor the cost of the scheme to ensure it stays within agreed parameters as set by the Scheme Advisory Board and HM Treasury. Should costs increase outside those parameters future changes to the scheme design may be required.

Your Pensions Choice

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In this section we look at:

Your pensions choice,

Who can join the Local Government Pension Scheme (LGPS), and

The cost of being a member of the LGPS.

Where pension terms are used, they appear in bold italic type. These terms are defined at the back of this booklet. Drawing your pension is a goal to look forward to. However, if your pension is to meet your expectations, you need to plan now for your income in retirement. Your retirement income and benefits, over and above the basic flat-rate State pension, will in general be provided by the State Second Pension (S2P), a personal pension plan, a stakeholder pension scheme or the Local Government Pension Scheme. These are described briefly below.


Local Government Pension Scheme

State Second Pension (S2P)

Personal Pension Plans and Stakeholder Pension Schemes Local Government Pension Scheme

The Local Government Pension Scheme (LGPS) is a statutory, funded pension scheme. As such it is very secure because its benefits are defined and set out in law. Key features of the LGPS include: A secure pension – worked out every scheme year and added to your pension account. The pension added to your account at the end of a scheme year is, if you are in the main section of the scheme, an amount equal to a 49th of your pensionable pay in that year. At the end of every scheme year the total amount of pension in your account is adjusted to take into account the cost of living (as currently measured by the Consumer Prices Index (CPI)). Flexibility to pay more or less contributions – you can boost your pension by paying more contributions, which you would get tax relief on. You also have the option in the LGPS to pay half your normal contributions in return for half your normal pension. This is known as the 50/50 section of the scheme and is designed to help members stay in the scheme when times are financially tough. Tax-free cash – you have the option when you draw your pension to exchange part of it for some tax-free cash.


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Peace of mind – your family enjoys financial security, with immediate life cover and a pension for your spouse, civil partner or eligible cohabiting partner and eligible children in the event of your death in service or if you die after leaving having met the 2 years vesting period. If you ever become seriously ill and you've met the 2 years vesting period, you could receive immediate ill health benefits. Freedom to choose when to take your pension – you do not need to have reached your Normal Pension Age in order to take your pension as, once you've met the 2 years vesting period, you can choose to retire and draw your pension at any time between age 55 and 75. Your Normal Pension Age is simply the age you can retire and take the pension you've built up in full. However, if you choose to take your pension before your Normal Pension Age it will normally be reduced, as it's being paid earlier. If you take it later than your Normal Pension Age it's increased because it's being paid later. Redundancy and Efficiency Retirement – if you are made redundant or retired in the interests of business efficiency at or after age 55 you will, provided you've met the 2 years vesting period, receive immediate payment of the main benefits you've built up (but there would be a reduction for early payment of any additional pension you have chosen to buy). Flexible retirement – if you reduce your hours or move to a less senior position at or after age 55 you can, provided your employer agrees, and you've met the 2 years vesting period, draw some or all of the benefits you have already built up, helping you ease into retirement, although your benefits may be reduced for early payment. Tax Relief and lower National Insurance Contributions – as a member of the LGPS, your contributions will attract tax relief at the time they are deducted from your pay and, up to State Pension Age, you will also pay lower National Insurance contributions on earnings between the Lower Earnings Limit and the Upper Accruals Point, unless you have opted to pay the married woman’s/widow’s reduced rate of National Insurance. The LGPS is contracted out of the State Second Pension (S2P). From April 2016 the Government plans to remove the reduction in National Insurance contributions for all contracted out pension schemes. That reduction is currently 1.4% of your pay. More details on how this will work are expected during 2015. State Second Pension (S2P) The State Second Pension (S2P) is part of the State Pension and is payable in addition to the flat rate Old Age Pension. Benefits are paid by the Department for Work and Pensions and cannot be paid before State Pension Age. Initially, S2P was an earnings related pension but from April 2009 it began building up as a flat rate pension. Personal Pension Plans and Stakeholder Pension Schemes Various institutions, such as banks, building societies and life assurance companies provide and administer personal pensions and stakeholder pension schemes. Your


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chosen organisation would invest your contributions. When you retire, the investments are cashed in and the sum of money realised is used to buy retirement benefits from the insurance market and from April 2015 these benefits can also be taken as cash (subject to tax as appropriate). Your benefits are therefore based on investment returns and are not guaranteed or linked to your earnings. The age from which you may receive them will vary according to the plan.

Joining the Local Government Pension Scheme (LGPS) Who can join? The LGPS is offered by local government employers and by other organisations that have chosen to participate in it. To be able to join the LGPS you need to be under age 75 and work for an employer that offers membership of the scheme. If you are employed by a designating body, such as a town or parish council, or by a non-local government organisation which participates in the LGPS (an admission body), you can only join if your employer nominates you for membership of the scheme. Police officers, operational firefighters and, in general, teachers and employees eligible to join another statutory pension scheme (such as the NHS Pension Scheme) are not allowed to join the LGPS. If you start a job in which you are eligible for membership of the LGPS you will be brought into the scheme, if your contract of employment is for 3 months or more. If it is for less than 3 months and you are, or during that period become, an Eligible Jobholder you will be brought into the scheme from the automatic enrolment date (unless your employer issues you with a postponement notice to delay bringing you into the scheme for up to a maximum of 3 months) or, if your contract is extended to be for 3 months or more, or you opt to join by completing an application form, you will be brought into the scheme from the beginning of the pay period after the one in which your contract is extended or you opt to join. If you are brought into the scheme you have the right to opt out. You cannot complete an opt out form until you have started your employment. Can I join the LGPS if I already have a personal pension or stakeholder pension scheme? If you currently contribute to a personal pension plan or stakeholder pension scheme and decide to join the LGPS, you can, if you wish, still continue to make your own contributions to the personal pension or stakeholder pension scheme or you can stop paying into it and provided your Pension Fund administrator agrees, consider transferring it into the LGPS.

You can, if you wish, pay up to 100% of your total UK taxable earnings in any one tax year into any number of concurrent pension arrangements of your choice (or, if greater, £3,600 to a “tax relief at source” arrangement, such as a personal pension or stakeholder pension scheme) and be eligible for tax relief on those contributions.


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Under HM Revenue and Customs rules there are controls on the pension savings you can have before you become subject to a tax charge – most people will not be affected by these controls. To find out more, see the section on Tax Controls and Your LGPS Benefits. How do I ensure that I have become a member of the LGPS? On joining the LGPS relevant records and a pension account (for each employment in the scheme, if you have more than one) will be set up and an official notification of your membership of the LGPS will be sent to you. You should check your pay slip to make sure that pension contributions are being deducted. Can I opt out of the LGPS?

If you are thinking of opting out you might want to first consider an alternative option which is to elect to move to the 50/50 section of the scheme. The 50/50 section allows you to pay half your normal contributions in return for half your normal pension build up. To find out more, see the section on Contribution Flexibility. If having considered the 50/50 option you still decide the LGPS is not for you, you can leave the LGPS at any time on or after your first day of eligible employment by giving your employer notice in writing. You might, however, want to take independent financial advice before making the final decision to opt out. If you opt out of the LGPS before completing 3 months membership you will be treated as never having been a member and your employer will refund to you, through your pay, any contributions you have paid during that time.

If you opt out of the LGPS with 3 or more months membership and before completing the 2 years vesting period you can take a refund of your contributions (less any statutory deductions) or transfer out your pension to another scheme. If you were in the scheme before 1 April 2014 and opt out on or after that date with 3 or more months membership and before completing the 2 years vesting period you will also have the option of having deferred benefits in the scheme instead of taking a refund of your contributions (less any statutory deductions). If you opt out of the LGPS after meeting the 2 years vesting period you will have deferred benefits in the scheme and will generally have the same options as anyone leaving their job before retirement, except you cannot draw your deferred benefits unless you have left your job. Also, if you re-join the scheme, you will not be permitted to join the two periods of membership together. Instead, you will have two separate sets of pension benefits in the scheme. You can find details of these options in the section on Leaving Your Job Before Retirement. If you opt-out, you can, provided you are otherwise eligible to join the scheme, opt back into the scheme at any time before age 75. If you opt out of the LGPS then:


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on the date your employer is first required to comply with the automatic enrolment provisions under the Pensions Act 2008, your employer will automatically enrol you back into the LGPS if you are an Eligible Jobholder at that time in the job you’ve opted out from, or

if on the date your employer is first required to comply with the automatic enrolment provisions under the Pensions Act 2008, you are not an Eligible Jobholder in the job you opted out from, your employer will, if you subsequently become an Eligible Jobholder in that job, automatically enrol you back into the LGPS from the automatic enrolment date.

Your employer must notify you if this happens. You would then have the right to again opt out of the LGPS. If you stay opted out your employer will normally automatically enrol you back into the LGPS approximately every 3 years from the date they have to comply with the automatic enrolment provisions provided, at the date your employer has to enrol you back in, you are an Eligible Jobholder.

Contributions What do I pay? The rate of contributions you pay is based on how much you are paid. There are 9 different pay bands with contribution rates ranging from 5.5% to 12.5% of your pensionable pay. If you elect for the 50/50 section of the scheme you would pay half the rates listed below. The rate you pay depends on which pay band you fall into. When you join, and every April afterwards, your employer will decide your contribution rate. Also, if your pay changes throughout the year, your employer may decide to review your contribution rate. Here are the pay bands and contribution rates that apply from April 2015.

The contribution rates and / or pay bands will be reviewed periodically and may change in the future. This is to maintain the average contribution from employees at 6.5% and to ensure the long term costs of the scheme are managed. You pay contributions on your normal salary or wages plus any shift allowance, bonuses, overtime (both contractual and non-contractual), Maternity Pay, Paternity Pay,

Contribution table 2015/16

If your actual pensionable pay is: You pay a contribution rate of: Up to £13,600 5.5% £13,601 to £21,200 5.8% £21,201 to £34,400 6.5% £34,401 to £43,500 6.8% £43,501 to £60,700 8.5% £60,701 to £86,000 9.9% £86,001 to £101,200 10.5% £101,201 to £151,800 11.4% £151,801 or more 12.5%


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Adoption Pay, Shared Parental Pay and any other taxable benefit specified in your contract as being pensionable. You do not pay contributions on any travelling or subsistence allowances, pay in lieu of notice, pay in lieu of loss of holidays, any payment as an inducement not to leave before the payment is made, any award of compensation (other than payment representing arrears of pay) made for the purpose of achieving equal pay, pay relating to loss of future pensionable payments or benefits, any pay paid by your employer if you go on reserve forces service leave nor (apart from some historical cases) the monetary value of a car or pay received in lieu of a car. When you join the scheme your employer will decide your appropriate rate of contributions for each job you have. Your employer may decide to review your contribution rate, if for example your pay changes during the year. If this results in a change to your contribution rate they must let you know. If you elect for the 50/50 section of the scheme you will start paying half your normal rate of contributions from your next available pay period. You should check your payslip to make sure that pension contributions are being deducted. Your contributions are very secure. As the LGPS is set up by Statute, payment of benefits to scheme members is guaranteed by law. What does my employer pay? Your employer currently pays the balance of the cost of providing your benefits after taking into account investment returns. Every three years, an independent actuary calculates how much your employer should contribute to the scheme. The amount will vary, but generally the present underlying assumption is that employees contribute approximately one third of the scheme's costs and the employer contributes the remainder. Do I receive tax relief on my contributions? The LGPS is fully approved by HM Revenue and Customs, which means that you receive tax relief on your contributions. To achieve this, your contributions are deducted from your pensionable pay before you pay tax. So, for example, if you pay tax at the rate of 20%, every £1 that you contribute to the scheme only costs you 80p net. There are restrictions on the amount of tax relief available on pension contributions. If the value of your pension savings increase in any one year by more than the annual allowance of £40,000 (2015/16) you may have to pay a tax charge. Most people will not be affected by the annual allowance. To find out more, see the section on Tax Controls and Your LGPS Benefits. What about my National Insurance contributions? As the LGPS is contracted out of the State Second Pension (S2P) you will, up to State Pension Age, pay reduced National Insurance contributions on your earnings between the Lower Earnings Limit and the Upper Accruals Point, unless you have


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opted to pay the married woman’s/widow’s reduced rate of National Insurance. From April 2016 the Government plans to remove the reduction in National Insurance contributions for all contracted out pension schemes. That reduction is currently 1.4% of your pay. More details on how this will work are expected during 2015. Is there any flexibility to pay less contributions? Yes, in the scheme there is an option known as 50/50 which provides the facility to contribute less to the LGPS. If you elect for 50/50 you would, from your next available pay period, pay half your normal contributions in return for half your normal pension. You still retain full life assurance and ill health cover when you are in the 50/50 section of the scheme. To find out more, see the section on Contribution Flexibility. Can I make extra contributions to increase my benefits? You can increase your benefits by paying additional contributions, known as Additional Pension Contributions (APCs) to buy extra LGPS pension, or by making payments to the scheme’s Additional Voluntary Contributions (AVC) arrangement, or by paying contributions into a personal pension, stakeholder pension or Free-standing AVC scheme of your own choice. These options are explained in more detail in the section on Contribution Flexibility. Is there a limit to how much I can contribute? At the present time there is no overall limit on the amount of contributions you can pay (although, as explained in the section on Contribution Flexibility, there is a limit on the extra LGPS pension you can buy and on the amount you can pay into the scheme’s AVC arrangement). However, tax relief will only be given on contributions up to 100% of your UK taxable earnings (or, if greater, £3,600 to a “tax relief at source” arrangement, such as a personal pension or stakeholder pension scheme). Additionally, under HM Revenue and Customs rules there are controls on the pension savings you can have before you become subject to a tax charge – most people will not be affected by these controls. To find out more, see the section on Tax Controls and Your LGPS Benefits. I’m already paying into the LGPS in another job(s) – can I also join in this job? If you are already paying into the LGPS and you get another job where your employer offers you membership of the scheme, you can be a member of the scheme in all positions, provided you are eligible to join (see the paragraph above on Who can join?). You will have a separate pension account for each job and receive a separate pension at retirement. If you leave one job before leaving the other(s), the pension from the pension account of the job that has ended will be joined to the pension account for the ongoing job (or, if there is more than one ongoing job, the one you choose) unless you have met the 2 years vesting period, in which case you will, if you wish, be able to choose, within 12 months of ceasing the job that has ended (or such longer period as your employer may allow), to keep the pension accounts separate. Details will be provided by The Enfield Pension Team at the time.


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Pension rights built up as a councillor or mayor in England or Wales cannot be joined with rights built up as an employee in England or Wales and vice versa.

What about my other non- LGPS pensions? If you have paid into another non-LGPS pension arrangement or to the LGPS in Scotland or Northern Ireland, you may be able to transfer your previous pension rights into the LGPS (provided you are not already drawing them as a pension). You only have 12 months from joining the LGPS to opt to transfer your previous pension rights, unless your employer and administering authority allows you longer. This is a discretion; you can ask your employer and administering authority what their policy is on this matter. The Enfield Pension Team can advise you of their process for transferring previous pension rights into the LGPS. Whether or not you should transfer your pension rights is not always an easy decision to make, and you may wish to seek the help of an independent financial adviser. For more information, see the section on Transferring Pension Rights into the LGPS. What if I’ve been a member before and can now rejoin the LGPS? If you rejoin the LGPS and you have deferred benefits in an LGPS fund in England or Wales (which you were awarded other than as a result of electing, on or after 11 April 2015, to opt out of membership of the scheme) your deferred benefits will normally be automatically joined with your new active pension account. If you want to retain separate deferred benefits then you must make such an election within 12 months of rejoining the scheme (or such longer period as your employer may allow). If you have deferred benefits in an LGPS fund in England or Wales which you were awarded as a result of electing, on or after 11 April 2015, to opt out of membership of the scheme, you cannot join those benefits with your new active pension account. They will remain as a separate deferred benefit. If you rejoin the LGPS in England and Wales and have a deferred refund this must be joined with your new active pension account. If you have deferred benefits in the LGPS in England or Wales and left the scheme before 1 April 2014 or your deferred benefits include membership built up before 1 April 2014 please see the Transferring Pension Rights into the LGPS section for further information. If you wish to transfer your previous LGPS pension rights you should contact the Enfield Pension Team as soon as possible to find out about this and about the matters you will need to consider in making your decision. Pension rights built up as a councillor or mayor in England or Wales cannot be joined with rights built up as an employee in England or Wales and vice versa.


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I'm already receiving an LGPS pension – will it be affected? If you built up any pension in the scheme before 1 April 2014 and you are re-employed in local government or by an employer who offers membership of the LGPS you must tell the LGPS fund that pays your pension about your new position, regardless of whether you join the scheme in your new position or not. They will let you know whether your pension in payment is affected in any way. Subject to the next paragraph, if you have only built up benefits in the LGPS from 1 April 2014, draw your pension and are then reemployed in local government or by an employer who offers membership of the LGPS you do not need to inform the LGPS fund that pays your pension as there is no effect on your pension in payment. If you are in receipt of an LGPS ill-health pension which is of the type that is stopped if you are in any gainful employment, your pension may be affected and you must inform the employer who awarded you that pension if you take up employment (whether in local government or elsewhere). They will let you know whether your pension in payment should be stopped.

Forms to fill in: Death benefit forms If you die in service, a lump sum death grant of three times your assumed pensionable pay is paid no matter how long you have been a member of the LGPS – please see the section on Life Cover – Protection For Your Family for more information. Your administering authority has absolute discretion when deciding on who to pay any death grant to. The LGPS, however, allows you to express your wish as to who you would like any death grant to be paid to by completing and returning an expression of wish form. The form is available from the Enfield Pension Team. If you cohabit with a partner of either the opposite or same sex, there is a provision in the LGPS for your partner to receive a survivor's pension on your death. Your administering authority must be satisfied that your relationship meets certain conditions laid down by the LGPS before paying a survivor's pension to an eligible cohabiting partner. You can find out about these conditions from the section on Life Cover – Protection For Your Family. If this applies to you, you may wish to complete a cohabiting partner's form to provide your administering authority with additional details to assist them when deciding whether the criteria for such a survivor's pension are met should a cohabiting partner's pension need to be paid. The form (if not included with this booklet) is available the Enfield Pension Team.

More information For more information or if you have a problem or question about your LGPS benefits, please contact the Enfield Pension Team. Contact details can be found at the end of this


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document. The national web site for members of the LGPS who contribute to the scheme on or after 1 April 2014 can be found at www.lgps2014.org. You can find out about what you can do if you are not happy about a decision made about your LGPS pension position from the section Help with Pension Problems.


Contribution Flexibility

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In this section we explain how as a member of the Local Government Pension Scheme (LGPS) you have:

the option to pay less contributions in return for less pension and,

the option to pay extra contributions to increase your pension benefits. Where pension terms are used, they appear in bold italic type. These terms are defined at the back of this booklet. Flexibility to pay less When you are a member of the LGPS there may be times when you are in difficult financial circumstances and consider opting out of the scheme to save money. The LGPS offers you the flexibility to stay in the scheme at such times and continue to build up valuable pension benefits. You can elect to pay half your normal contributions and build up half your normal pension. This is known as the 50/50 section of the LGPS. In the LGPS there are two sections of the scheme, the main section and the 50/50 section. When you join the scheme you will automatically be placed in the main section where you pay normal pension contributions in return for normal pension build up. Once you are a member of the scheme you will be able to elect in writing to move to the 50/50 section if you wish. Once you make an election you will start paying half your normal contributions from your next available pay period.

Who can elect for 50/50? As a member of the LGPS you can elect to pay into the 50/50 section at any time. An election to join this section must be made in writing to your employer. There is no limit to the number of times you can elect to move between the main and the 50/50 section, and

Contribution Table 2015/16

If your actual pensionable pay is: You pay a contribution rate of:

Main section 50/50 section

Up to £13,600 5.5% 2.75%

£13,601 to £21,200 5.8% 2.9%

£21,201 to £34,400 6.5% 3.25%

£34,401 to £43,500 6.8% 3.4%

£43,501 to £60,700 8.5% 4.25%

£60,701 to £86,000 9.9% 4.95%

£86,001 to £101,200 10.5% 5.25%

£101,201 to £151,800 11.4% 5.7%

£151,801 or more 12.5% 6.25%


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vice versa. Your election once received by your employer takes effect from your next available pay period. What does my election for 50/50 need to include? You need to make a written election to your employer to move to the 50/50 section of the LGPS. This can be in the form of a letter or a completed 50/50 election form. A 50/50 election form (if not included with this booklet) is available from your employer or the Enfield Pension Team. If you have more than one job in which you contribute to the scheme you must specify in which of the jobs you wish to be moved to the 50/50 section. When you make an election for the 50/50 section your employer must provide you with information on the effect this will have on your benefits in the scheme. What happens to life cover and ill health cover if I am in the 50/50 section? In the 50/50 section you build up half your normal pension because you are paying half your normal contributions. However, if you were to die in service the lump sum death grant and any survivor pensions would be worked out as if you were in the main section of the scheme. If you are awarded a Tier 1 or Tier 2 ill-health pension whilst in the 50/50 section the amount of any ill-health enhancement added to your pension is worked out as if you were in the main section of the scheme.

How long can I remain in the 50/50 section? The 50/50 section is designed to be a short-term option for when times are tough financially. Because of this your employer is required to re-enrol you back into the main section of the scheme approximately three years after they have reached their staging date for automatic enrolment purposes under the Pensions Act 2008 (and approximately every three years thereafter). Your employer will tell you when this is if you’re in the 50/50 section of the scheme. If you wish to continue in the 50/50 section at that point you would need to make another election in writing to remain in that section of the scheme. If you are in the 50/50 section and move onto a period of no pay due to sickness or injury or no pay during a period of ordinary maternity leave, ordinary adoption leave or paternity leave then you will be moved back into the main section of the scheme from your next pay period if you are still not in receipt of pay at that time. If you are in the 50/50 section you can choose to revert back to the main section of the scheme at any time by informing your employer in writing. This can be in the form of a letter or a completed election form to rejoin the main section. An election form to rejoin the main section is available from your employer or the Enfield Pension Team. If you have more than one job in which you contribute to the 50/50 section you must specify in which of the jobs you wish to be moved back to the main section. You will then start to build up full benefits in the main section from the next available pay period after your employer receives your election.


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What does my employer pay if I'm in the 50/50 section? Your employer continues to pay their normal contribution rate (not half their rate) when you are in the 50/50 section of the scheme. What if I'm currently paying extra contributions or might wish to do so in the future - is this possible when in the 50/50 section? As the 50/50 section is considered a short term option for use in times of financial difficulty it's not expected that you will remain in the section for a long period of time. The rules of the scheme do not therefore permit you to pay additional contributions in certain circumstances when you are in the 50/50 section. The effect on additional contribution options are detailed below:

Type of Contract Effect of being in the 50/50 section

Additional Pension Contribution (APC) Contract

(full cost to you to buy extra pension)

Shared Cost Additional Pension Contribution Contract (SCAPC)

(cost shared between you and your employer to buy extra pension)

Existing Contracts - Must Cease

Additional Voluntary Contributions (AVC)

Shared Cost Additional Voluntary Contributions (SCAVC)

Additional Pension Contribution (APC) Contract (full cost to you to buy lost pension because of a trade dispute or unpaid authorised leave of absence)

Shared Cost Additional Pension Contribution (SCAPC) Contract (cost shared between you and your employer to buy lost pension due to unpaid authorised leave of absence or unpaid additional maternity or adoption leave or unpaid shared parental leave)

Existing Contracts - Can Continue (at the same rate as before you elected for the 50/50 option)

Additional Pension Contribution (APC) Contract (full cost to you to buy extra pension)

Shared Cost Additional Pension Contribution Contract (SCAPC) (cost shared between you and your employer to buy extra pension)

New Contracts - Not Permitted


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Type of Contract Effect of being in the 50/50 section

Additional Voluntary Contributions (AVC)

Shared Cost Additional Voluntary Contributions (SCAVC)

Additional Pension Contribution (APC) Contract (full cost to you to buy lost pension because of a trade dispute or unpaid authorised leave of absence)

Shared Cost Additional Pension Contribution Contract (SCAPC) (cost shared between you and your employer to buy lost pension due to unpaid authorised leave of absence or unpaid additional maternity or adoption leave or unpaid shared parental leave)

New Contracts – Permitted

Added years contract

Existing Contracts - Can Continue (at the same rate as before you elected for the 50/50 option) Note that these contracts only apply to scheme members who took out such contracts before 1 April 2008.

Additional Regular Contributions (ARC) contract

Additional Survivor Benefit Contributions (ASBC) contract

Existing Contracts - Can Continue (at the same rate as before you elected for the 50/50 option) Note that these contracts only apply to scheme members who took out such contracts before 1 April 2014.

Part-time buy-back contract Existing Contracts - Can Continue (at the same rate as before you elected for the 50/50 option).

Part-time buy-back contract New Contracts - Permitted

Flexibility to pay more Most of us look forward to a happy and comfortable retirement and in order to have that little bit extra during your retirement years you may wish to consider paying extra contributions, which are a tax efficient way of topping up your income when you retire. There are a number of ways you can provide extra benefits, on top of the benefits you are already looking forward to as a member of the LGPS.


22

You can improve your retirement benefits by paying: Are there any limits on how much I can pay to increase my pension benefits? There is no overall limit on the amount of contributions you can pay (although there is a limit on the extra scheme pension you can buy and on the amount of Additional Voluntary Contributions you can pay). However, tax relief will only be given on contributions up to 100% of your UK taxable earnings (or, if greater, £3,600 to a “tax relief at source” arrangement, such as a personal pension or stakeholder pension scheme). Additionally, under HM Revenue and Customs tax rules there are controls on the pension savings you can have before you become subject to a tax charge – most people will not be affected by these controls. These controls, and the potential effect of paying extra contributions if you have lifetime allowance enhanced protection, fixed protection, or fixed protection 2014 are explained in more detail later under the heading Do the tax rules on pension savings limit the extra I can pay?.

The options explained: Paying Additional Pension Contributions (APCs) to buy extra LGPS pension If you are in the main section of the scheme you can pay more in contributions to buy up to £6,675 of extra pension, or to purchase pension lost during certain periods of leave of absence on no pay or periods on no pay due to a trade dispute. This section explains the facility to purchase extra pension – see the section Leave of Absence and the LGPS for information on purchasing lost pension. Any extra pension you purchase is payable each year in retirement and is payable on top of your normal LGPS benefits. You can pay for this extra pension either regularly from your pay or via a lump sum. Where your employer also chooses to contribute to the APC arrangement, this is known as Shared Cost Additional Pension Contribution (SCAPC) arrangement. If you are in the 50/50 section of the scheme you cannot commence an APC or SCAPC to buy extra pension. If you have an existing APC or SCAPC contract to buy extra pension and elect for the 50/50 section the contract must cease.

Additional Pension Contributions (APCs) to buy extra LGPS pension (but not if you are in the 50/50 section)

Additional Voluntary Contributions (AVCs) arranged through the LGPS (in-house AVCs)

Free Standing Additional Voluntary Contributions (FSAVCs) to a scheme of your choice

Contributions into a stakeholder or personal pension plan

You can combine any of these options.


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Paying Regular Contributions You can choose to buy extra pension by spreading payment of the Additional Pension Contributions (APCs) over a number of complete years (unless the Enfield Pension Team determines that it would not be practicable to allow APCs to be paid by regular contributions, in which case payment could be made by a lump sum). Any extra regular contributions would be taken from your pay, just like your basic contributions. Your LGPS contributions and APCs are deducted before your tax is worked out, so, if you pay tax, you receive tax relief automatically through the payroll. You qualify for tax relief (normally at your highest rate) on all pension contributions up to 100% of your taxable earnings, including your normal contributions. The minimum period of time you can spread payment of APCs over is 12 months and the maximum period is the number of years to your Normal Pension Age. The latest you can take out such an APC contract is 1 year before your Normal Pension Age. At the end of every scheme year the proportion of extra pension that you have paid for in that year is added to your pension account. You can choose to stop paying APCs at any time by notifying the Enfield Pension Team in writing. You will be credited with the extra pension that you have paid for at the time of ceasing payment.

Paying by Lump Sum As an alternative to paying Additional Pension Contributions (APCs) over a period of time you can choose to buy extra pension by paying a one-off lump sum either via your pay or directly to your Pension Fund. If you choose to make payment directly to the Pension Fund you will need to arrange tax relief directly with HMRC as the contributions are not being deducted from your pay. You can choose to make a lump sum payment to buy extra pension through an APC at any time whilst you are contributing to the main section of the scheme. The amount of extra pension you purchase is added to your pension account in the scheme year in which payment is made.

General Additional Pension Contributions information The cost to you of buying extra pension is calculated in accordance with guidance issued by the Secretary of State for the Department for Communities and Local Government which can be reviewed at any time. The extra pension you are buying will increase in line with the cost of living, both before and after you draw your pension. If you have more than one job in which you are a member of the scheme you would have to specify which job’s pension account any extra pension you are


24

buying is to be credited to. If you wish to pay Additional Pension Contributions for each job, you would have to make a separate election for each job. The cost of any extra pension you buy is paid for by you unless your employer chooses to pay some or all of the cost of the APC. This is an employer discretion. You can ask your employer what their policy is on this. If you wish to buy extra pension and you already have an existing APC arrangement or, before 1 April 2014, you elected to buy additional pension under an Additional Regular Contribution (ARC) arrangement, the amount of additional pension from these existing arrangements will be taken into account when determining the maximum extra pension you can buy within the £6,675 limit. Any extra pension you purchase will be paid at the same time as your main LGPS benefits. If you choose to retire early and draw your benefits before your Normal Pension Age, or you are retired on redundancy or business efficiency grounds before your Normal Pension Age, the extra pension you have bought will be reduced for early payment. If you draw your benefits on flexible retirement, you can, if you wish, draw all the extra pension you have paid for too, although it will be reduced for early payment. If you do so, your APC contract will cease (if you are still paying these extra contributions when you draw your benefits), although you will be able to take out a new APC contract (provided you are at least one year before your Normal Pension Age if you want to pay the APCs by regular contributions). If you are awarded (by your employer) an enhanced ill-health pension (either Tier 1 or Tier 2) then the remaining amount of any APC or SCAPC contract you are paying at that time is deemed to have been paid in full and is credited to your pension account in the scheme year your pension is paid.

If you draw your pension after your Normal Pension Age, the amount of any extra pension you have bought will be increased as its being paid later. On retirement, you can choose to exchange some of the extra pension you have bought for a tax-free cash lump sum in the same way as your main LGPS pension. For more information on exchanging part of your pension for a lump sum see the section on Your Pension. If you die in service then no extra benefits from your APC contract will be payable. This is because the amount of extra pension you purchase is for you only. If you die after leaving but before retirement and your benefits are held in the LGPS for payment (deferred benefits), then a lump sum of 5 times the extra annual pension you paid for will be payable. If you die after starting to draw your pension and you are under age 75 at the date of death, a lump sum of 10 times your extra annual pension minus any extra pension already paid to you may be payable.


25

You can obtain a quote and print off an application form to buy extra pension at www.lgps2014.org. You can also contact the Enfield Pension Team for further information on paying Additional Pension Contributions. You may be required to undergo a medical examination at your own expense before being allowed to buy extra pension.

Paying Additional Voluntary Contributions (AVC) arranged through the LGPS (in-house AVCs) All local government pension funds have an AVC arrangement in which you can invest money, deducted directly from your pay, through an AVC provider (often an insurance company or building society). If you choose to pay AVCs under the LGPS, the AVCs are invested separately in funds managed by the AVC provider. You have your own personal account that, over time, builds up with your contributions and the returns on your investment, and will be available to you when you retire. You can often choose which investment route you prefer. You can elect to pay an AVC if you are in either the main or 50/50 section of the scheme. You decide how much you can afford to pay. You can pay up to 100% of your pensionable pay into an in-house AVC in each job where you pay into the LGPS (unless the AVC arrangement is one you made an election to pay into prior to 1 April 2014 – in which case please see the section on If you joined the LGPS Before 1 April 2014). Your employer can also pay towards your AVC. This is known as a Shared Cost AVC. This is an employer discretion. AVCs are deducted from your pay, just like your normal contributions. Your LGPS and AVC contributions are deducted before your tax is worked out, so, if you pay tax, you receive tax relief automatically through the payroll. You qualify for tax relief (normally at your highest rate) on all pension contributions up to 100% of your taxable earnings, including your normal contributions. Deductions start from the next available pay period after your election has been accepted and you may vary or cease payment at any time whilst you are paying into the LGPS. If you have previously paid AVCs to the LGPS in England or Wales (in-house AVCs), these must be transferred to the AVC arrangement offered by your new pension fund administrator if your main scheme benefits are transferred (but if you have an AVC contract which started before 1 April 2014 please see the section on Transferring Pension Rights into the LGPS). If you have paid AVCs to a different pension scheme, you can transfer these to the LGPS to purchase extra pension. An election to do so must be made within 12 months of joining the LGPS, unless your employer and administering authority exercise a



26

discretion to allow you longer. You can ask your employer and administering authority what their policy is on this matter. You can also pay in-house AVCs to provide extra life cover. Your membership of the LGPS already gives you cover of three times your assumed pensionable pay if you die in service, but you can pay AVCs to increase this and / or, if the AVC arrangement your pension fund administering authority has set up includes this facility, to provide additional benefits for your dependants in the event of your death in service. This may be subject to satisfactory completion of a medical questionnaire. Any extra life cover paid for through AVCs will stop when you retire or leave. Here are the different ways you may be able to use your in-house AVC Fund on retirement:

Buy an Annuity

This is where an insurance company, bank or building society of your choice takes your AVC Fund and pays you a pension in return. You would buy an annuity at the same time as you draw your LGPS benefits. An annuity is paid completely separately from your LGPS benefits. The amount of annuity depends on several factors, such as interest rates and your age. You also have some choice over the type of annuity, for example whether you want a flat-rate pension or one that increases each year, and whether you also want to provide for dependants’ benefits in the event of your death. Annuities are subject to annuity rates which in turn are affected by interest rates. When interest rates rise, the organisation selling annuities is able to obtain a greater income from each pound in your AVC fund, and therefore can provide a higher pension. A fall in interest rates reduces the pension which can be purchased.

Buy a Top-up LGPS Pension When you draw your LGPS benefits you can use some or all of your AVC fund to buy a top-up pension from the LGPS. This automatically provides an inflation-proofed pension and dependants’ benefits and is based on set purchase factors which do not tend to change.

Take your AVCs as cash You can take some or all of your AVC fund as a tax-free cash lump sum1 but you can only take it all as a lump sum if you draw it at the same time as your main LGPS

1 Provided the lump sum does not exceed £312,500 (2014/2015 figure) less the value of any other pension rights you have in payment.


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benefits and provided, when added to your LGPS lump sum, it does not exceed 25% of the overall value of your LGPS benefits (including your AVC fund).

Buy extra membership in the LGPS If your election to start paying AVCs was made before 13 November 2001 you may be able in certain circumstances (such as flexible retirement, retirement on ill health grounds, or on ceasing payment of your AVCs before retirement) to convert your AVC fund into extra LGPS membership in order to increase your LGPS benefits. To find out how benefits are calculated on this membership see the section If you joined the LGPS Before 1 April 2014.

Transfer your AVC fund to another pension scheme or arrangement You can transfer your AVC fund to another pension scheme or arrangement.

If you draw benefits on flexible retirement and your AVC contract started on or after 13 November 2001 you can choose to take all of your AVC fund at the time you draw your flexible retirement benefits, and, if you wish, continue paying AVCs. If your AVC contract started before 13 November 2001 your AVC contract will cease and you will have to use all of your AVC fund in one of the above ways at the time you draw your flexible retirement benefits. If you leave before retirement, your contributions will cease when you leave. The value of your AVC fund will continue to be invested until it is paid out. Your AVC plan is similar to your main LGPS benefits: it can be transferred to another pension arrangement or drawn at the same time as your LGPS benefits. Payments into in-house AVCs will stop when you leave or retire. You can also contact you’re the Enfield Pension Team for further information on paying AVCs. Paying Free Standing Additional Voluntary Contributions (FSAVCs) These are similar to in-house AVCs but are not linked to the LGPS in any way. With FSAVCs, you choose a provider, usually an insurance company. You may want to consider their different charges, alternative investments and past performance when you do this. You choose how much to pay into an FSAVC arrangement. You can pay up to 100% of your UK taxable earnings, less your normal pension contributions. Your FSAVC fund should grow as it is invested and will be available later in your life to convert into an additional pension of your choice. You can often choose which investment route you prefer. You can take up to 25%2 of the value of your FSAVC fund as a tax-free lump sum3.

2 From April 2015 you can take the remainder of your FSAVC as a lump sum (subject to your marginal tax

rate) provided the FSAVC provider allows this option.


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You can also pay FSAVCs to provide additional life cover. Your LGPS membership already gives you cover of three times your assumed pensionable pay if you die in service, but you can increase this amount via an FSAVC or use the FSAVC to provide additional dependants benefits on your death in service. This may be subject to satisfactory completion of a medical questionnaire. Contribute to a concurrent personal pension plan or stakeholder pension scheme You may be able to make your own arrangements to pay into a personal pension plan or stakeholder pension scheme at the same time as paying into the LGPS. With these arrangements, you choose a provider, usually an insurance company. You may want to consider their charges, alternative investments and past performance when you do this. You choose how much to pay into the arrangement. You can pay up to 100% of your total UK taxable earnings in any one tax year into any number of concurrent pension arrangements of your choice (or, if greater, £3,600 to a “tax relief at source” arrangement, such as a personal pension or stakeholder pension scheme) and be eligible for tax relief on those contributions. If you pay into a personal pension plan or stakeholder pension scheme, the contributions you make to it are invested in funds managed by an insurance company. You have your own personal account that, over time, builds up with your contributions and the returns on your investment, and will be available later in your life to convert into additional benefits. You can often choose which investment route you prefer. When the benefits are paid, you will be able to take up to 25% of your Fund as a tax-free lump sum4, with the remainder available for use to buy an annuity from an insurance company, bank or building society or, if the personal pension or stakeholder provider offers the option, to take as a taxable lump sum. For more information on the variety of options available when drawing benefits from a personal pension plan or a stakeholder pension scheme see the Government's guidance website www.pensionwise.gov.uk. This website provides guidance on drawing flexible benefits only and does not provide information on taking benefits from a defined benefit scheme such as the LGPS.

I am already buying extra LGPS membership and or paying Additional Regular Contributions. Can I buy any extra benefits? Even if:

you are buying extra years of LGPS membership (added years) under a contract to do so which you entered into before 1 April 2008, and / or

you are purchasing additional pension through an Additional Regular Contribution (ARC) contract which you entered into before 1 April 2014

3 Provided the lump sum does not exceed £312,500 (2015/16 figure) less the value of any other pension

rights you have in payment. 4 Provided the lump sum does not exceed £312,500 (2015/16 figure) less the value of any other pension rights you have in payment.

http://www.pensionwise.gov.uk/


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you can still pay Additional Pension Contributions (APCs) to buy extra LGPS pension (APCs) up to a maximum of £6,675 (including any additional pension being bought by ARCs) and / or pay Additional Voluntary Contributions (AVCs), or Free Standing AVCs (FSAVCs), or contribute to a concurrent personal pension plan or stakeholder pension scheme, if you wish. Can my employer award me any extra pension benefits? Your employer, at their discretion, can award additional annual pension up to £6,675. This can be awarded to you if you are an active member or within six months of leaving the scheme if you leave on the grounds of redundancy or business efficiency. You can ask your employer what their policy is on this. Your employer can also, at their discretion, pay into your AVC scheme arranged through the LGPS (in-house AVCs). This is known as a shared cost AVC arrangement. What happens if I pay extra and elect for the 50/50 option? If you move from the main section of the scheme to the 50/50 section the following rules apply: If you have:

entered into a contract to buy extra pension by making Additional Pension Contributions (APCs) or entered into a Shared Cost APC contract with your employer,

these contracts must cease when you elect to move to the 50/50 section. Also, when you are in the 50/50 section of the scheme, you cannot elect to commence payment of an APC contract, nor can you elect to commence payment of a Shared Cost APC, unless it's to purchase an amount of pension lost during certain periods of leave of absence on no pay or periods on no pay due to a trade dispute (see below). If you have:

entered into an APC contract to purchase the amount of lost pension due to a trade dispute, or

entered into a Shared Cost APC to purchase the amount of lost pension during a period of unpaid authorised leave of absence or during a period of unpaid additional maternity or adoption leave or unpaid shared parental leave, or

entered into a contract to buy-back some previous part-time service, or

prior to 1 April 2014 entered into a contract to buy extra pension (ARCs) or,

prior to 1 April 2014 entered into a contract to count pre 6 April 1988 membership for a surviving eligible cohabiting partner's pension, or

prior to 1 April 2008 entered into a contract to buy extra LGPS membership (added years)

these contracts continue when you elect to move to the 50/50 section and the contributions under the contracts must be paid in full.


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If you have:

entered into an AVC arrangement or a Shared Cost AVC arrangement with your employer,

these continue when you elect to move to the 50/50 section, unless you choose to terminate the contract. You can elect to commence payment of an AVC or Shared Cost AVC when you are in the 50/50 section of the scheme. In the 50/50 section of the scheme you can commence payment of:

a Shared Cost APC to purchase the amount of pension lost during a period of unpaid authorised leave of absence or during a period of unpaid additional maternity or adoption leave or unpaid shared parental leave or,

an APC to purchase the amount of pension lost during a trade dispute or,

an AVC or Shared Cost AVC. What if I'm paying extra and I am absent from work? The rules that apply if you are paying extra contributions and you are absent from work due to:

sickness or injury,

relevant child related leave,

authorised leave of absence,

a trade dispute, or

reserve forces service leave are covered in the section on Leave of Absence and the LGPS. Do the tax rules on pension savings limit the extra I can pay? There are HM Revenue and Customs controls on the total amount of contributions you can make into all pension arrangements and receive tax relief. There are also controls, known as the lifetime allowance and the annual allowance on all the pension savings you can have before you become subject to a tax charge. Most scheme members’ pension savings will be less than these allowances. You can, if you wish, pay up to 100% of your UK taxable earnings in any tax year into any number of concurrent pension arrangements of your choice (or, if greater, £3,600 to a “tax relief at source” arrangement, such as a personal pension or stakeholder pension scheme) and receive tax relief on the contributions. The lifetime allowance is the total capital value of all your pension arrangements which you can build up without paying extra tax. If the value of your benefits when you draw them (not including any state retirement pension, state pension credit or any spouse’s, civil partner’s, eligible cohabiting partner’s or dependant’s pension you may be entitled to) exceeds your lifetime allowance a tax charge will be made against the excess. The lifetime allowance for 2015/16 is £1.25 million (unless you have a protected


31

higher lifetime allowance – see the section on Tax Controls and Your LGPS Benefits). The annual allowance is the amount your pension savings can increase by in any one year without paying extra tax. For the LGPS the pension savings year runs from 1 April to 31 March. The annual allowance for 2015/16 is £40,000. You would only be subject to an annual allowance tax charge if the value of your pension savings for a tax year increases by more than £40,000. However, a three year carry forward rule normally allows you to carry forward unused annual allowance from the last three tax years. This means that even if the value of your pension savings increase by more than £40,000 in a year you may not be liable to the annual allowance tax charge. Most people will not be affected by the annual allowance tax charge because the value of their pension saving will not increase in a tax year by more than £40,000 or, if it does, they are likely to have unused allowance from previous tax years that can be carried forward. If you have applied for lifetime allowance enhanced protection, fixed protection or fixed protection 2014 from HM Revenue and Customs you will lose that protection if you pay contributions into a money purchase pension arrangement (e.g. pay LGPS in-house AVCs or pay into a stakeholder or personal pension plan). You may not lose this protection if you are paying AVCs at 5 April 2006 purely for extra life cover and the terms of the policy have not varied significantly since then. You can find out more about HM Revenue and Customs controls on your pension savings from the section on Tax Controls and Your LGPS Benefits.

More information For more information or if you have a problem or question about your LGPS benefits, please contact the Enfield Pension Team. Contact details can be found at the end of this document. The national web site for members of the LGPS who contribute to the scheme on or after 1 April 2014 can be found at www.lgps2014.org. You can find out about what you can do if you are not happy about a decision made about your LGPS pension position from the section Help with Pension Problems.


Your Pension

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You can look forward to enjoying a guaranteed package of benefits when you retire. In this section we look at how your pension is worked out and when you can draw your pension if you pay into the LGPS on or after 1 April 2014. Where pension terms are used, they appear in bold italic type. These terms are defined at the back of this booklet How is your pension worked out?

Your LGPS benefits are made up of:

Your LGPS annual pension is worked out as follows: Every year, you will build up a pension at a rate of 1/49th of the amount of pensionable pay (and any assumed pensionable pay) you received in that scheme year if you are in the main section of the scheme (or half this rate of build up for any period you have elected to be in the 50/50 section of the scheme). If during the scheme year you had been on leave on reduced contractual pay or no pay due to sickness or injury, or had been on relevant child related leave or reserve forces service leave then, for the period of that leave, your pension is based on your assumed pensionable pay (other than during any part of relevant child related leave where the pensionable pay you received was higher than your assumed pensionable pay). The amount of pension built up during the scheme year is then added to your pension account and revalued at the end of each scheme year so your pension keeps up with the cost of living. If you joined the LGPS before 1 April 2014, your benefits for membership before 1 April 2014 were built up in the final salary scheme and are calculated differently. To find out more see the section If You Joined the LGPS Before 1 April 2014. Your LGPS Annual Pension If you are in the main section of the scheme the rate you build up your pension is 1/49th of the amount of your pensionable pay and any assumed pensionable pay in the scheme year. If you are in the 50/50 section of the scheme the rate you build up your pension is half the rate in the main section (1/98th of the amount of your pensionable pay and any assumed pensionable pay in the scheme year). Your pensionable pay is the amount of pay on which you pay your pension contributions. If you are absent from work on reduced contractual pay or no pay due to sickness or injury or have a period of relevant child related leave or reserve forces service leave

An annual pension that, after leaving, increases every year in line with the cost of living for the rest of your life, and

The option to exchange part of your pension for a tax-free lump sum paid when you draw your pension benefits.

Your Pension

33

then, during the period of absence, the pensionable pay used is the notional pay you would have received but for the absence. This is known as assumed pensionable pay and ensures that the pension you build up during this period is not affected by your reduction in pay. However, during any part of relevant child related leave where the pensionable pay you received is higher than your assumed pensionable pay your actual pensionable pay for that part of the leave period is used instead. You will have a pension account and your pension built up each scheme year is added to your account. The scheme year runs from 1 April to 31 March. If you hold separate pensionable employments you will have a separate pension account for each job. If you are paying extra contributions to buy extra pension through Additional Pension Contributions (APCs) or Shared Cost Additional Pension Contributions, (SCAPCs) the amount you buy in each scheme year is added to your pension account. Your employer may also enhance your pension at their discretion. Your employer can grant you up to £6,675 extra annual pension. This is a discretion your employer can use if they so wish and they will publish their policy on this. Any extra pension awarded by your employer is added to your pension account in the scheme year in which it is awarded. If you transfer a previous pension into the LGPS the amount of pension that the transfer purchases is added to your pension account in the scheme year in which the transfer takes place. If you have a Court order requiring that part of your pension should be transferred to an ex-spouse or civil partner following divorce or dissolution of a civil partnership then an amount is deducted from your pension account in the scheme year in which the Court order takes effect. If you have an annual allowance tax charge applied to your LGPS benefits then an amount is deduced from your pension account in the scheme year when the charge is due. At the end of every scheme year the value of the pension held in your pension account is revalued. Revaluation means that the value of your pension keeps up with the cost of living. The value of your pension is revalued in line with HM Treasury Revaluation Orders which currently use the rate of the Consumer Prices Index (CPI) to revalue your pension account. How is my pension worked out - an example Let's look at the buildup in a member's pension account for 5 years in the scheme. Let's assume that the member joins the scheme on 1 April 2014, that their pensionable pay is £24,500 in scheme year 1 and their pensionable pay increases by 1% each year. The cost of living (revaluation adjustment) for the end of the scheme year ending on 31 March 2015 is 1.2% and let's assume that the cost of living (revaluation adjustment) for the following 4 years is 2% each year.

Your Pension

34

Let's assume that the member had a period of time in the 50/50 section of the scheme and for 6 months from 1 April 2015 to 30 September 2015 this member paid half their normal pension contributions in return for half their normal pension build up. Their pension account would look as follows:

Scheme Year

Opening Balance

Pension Build up in Scheme Year Pay/ Build up rate = Pension

Total Account 31 March

Cost of Living Revaluation Adjustment

Updated Total Account

1 2014/15

£0.00 £24,500/ 49 = £500

£500 1.2% = £6 £500 + £6 = £506

2 2015/16

£506 £12,372.50 / 98 = £126.25 £12,372.50/ 49 = £252.50

£884.75 2% = £17.70 £884.75 + £17.70 = £902.45

3 2016/17

£902.45 £24,992.45/ 49 = £510.05

£1,412.50 2% = £28.25 £1,412.50 + £28.25 = £1,440.75

4 2017/18

£1,440.75 £25,242.37/ 49 = £515.15

£1,955.90 2% = £39.12 £1,955.90 + £39.12 = £1,995.02

5 2018/19

£1,995.02 £25,494.79/49 = £520.30

£2,515.32 2% = £50.31 £2,515.32 + £50.31 = £2,565.63

Scheme Year

Opening Balance

Pension Build up in Scheme Year Pay/ Build up rate = Pension

Total Account 31 March

Cost of Living Revaluation Adjustment

Updated Total Account

1 2014/15

£0.00 £24,500/ 49 = £500

£500 1.2% = £6 £500 + £6 = £506

2 2015/16

£506 £24,745/ 49 = £505

£1,011.00 2% = £20.22 £1,011.00 + £20.22 = £1,031.22

3 2016/17

£1,031.22 £24,992.45/ 49 = £510.05

£1,541.27 2% = £30.82 £1,541.27 + £30.82 = £1,572.09

4 2017/18

£1,572.09 £25,242.37/ 49 = £515.15

£2,087.24 2% = £41.74 £2,087.24 + £41.74 = £2,128.98

5 2018/19

£2,128.98 £25,494.79/49 = £520.30

£2,649.28 2% = £52.99 £2,649.28 + £52.99 = £2,702.27

Your Pension

35

You can take a tax-free lump sum by giving up some of your annual pension. You can take up to 25% of the capital value of your LGPS benefits as a lump sum5. For every £1 of annual pension that you give up you will receive a £12 lump sum. In the same way, giving up £100 of your annual pension would give you £1,200 lump sum, and so on. Your pension can be reduced or increased, depending on your reasons for taking your pension benefits - see when can I retire and draw my LGPS pension below. If you joined the LGPS before 1 April 2014 you will have benefits in the final salary scheme. Benefits built up before 1 April 2014 are worked out differently and are calculated using your membership in the scheme prior to 1 April 2014 and your final pay when you leave the scheme. For each year of LGPS membership built up between 1 April 2008 to 31 March 2014 you receive a pension based on 1/60th of your final pay. For each year of LGPS membership built up before 1 April 2008 you receive a pension based on 1/80th of your final pay. You will also receive an automatic lump sum. Please read the section If you Joined the LGPS before 1 April 2014 for more information. If you were a member of the LGPS before 1 April 2012 and were nearing retirement at that time you will have additional protection to ensure that the value of the pension you could have built up in the main section of the scheme after 31 March 2014 is at least as good as the amount of pension you could have built up if you had continued to build up pension at the rate of 1/60th of your final pay for each year of membership. Please read the section If you Joined the LGPS before 1 April 2014 for more information. What options do I have on when I draw my benefits from the scheme? You may be able to alter your standard retirement package by: Taking a lump sum As mentioned earlier, when you draw your pension you will be able to take part of your benefits as a tax-free lump sum by giving up some of your pension. An option to take a lump sum has to be made in writing before your benefits are paid. So that you have plenty of time to make up your mind and seek financial advice if you wish, it is important you contact the Enfield Pension Team well in advance of your intended retirement date so we can provide you with more details. Your pension will be reduced in accordance with any election you make to receive a lump sum. Any subsequent pension for your spouse, civil partner, eligible cohabiting partner or eligible children will not be affected if you decide to exchange part of your pension for a lump sum. If you have a Guaranteed Minimum Pension (GMP), you may not reduce your pension to below the level of your GMP.

5 Provided the lump sum does not exceed £312,500 (2015/16 figure) less the value of any other pension

rights you have in payment.

Your Pension

36

Getting a small pension paid as a lump sum Your Pension Fund administrator may be able to pay a small pension as a one off lump sum less a tax charge. However, the circumstances where this may happen are restrictive, particularly if you have any other pension benefits. If a small pension is paid as a one off lump sum, all other benefits from the LGPS would have to cease, so the Enfield Pension Team will have to check that you have no other LGPS benefits before deciding whether your pension can be paid as a one off lump sum. What if I am paying extra? If you are buying extra LGPS pension by paying Additional Pension Contributions (APCs) or Shared Cost Additional Pension Contributions (SCAPCs) either by regular payment or you made a one-off lump sum payment. When you draw your pension, this will include the extra pension that you have paid for. However, if you are paying APCs or SCAPCs when you retire and qualify for the type of ill health pension where your benefits are enhanced (Tier 1 and Tier 2 ill health pensions), you will be credited with all the extra pension that you set out to buy, even if you have not completed full payment for it. If you choose to retire early and draw your benefits before your Normal Pension Age, or you are retired on redundancy or business efficiency grounds before your Normal Pension Age, the extra pension you have bought will be reduced for early payment. If you draw your benefits on flexible retirement, you can, if you wish, draw all the extra pension you have paid for too, although it will be reduced for early payment. If you do so, your APC contract and / or SCAPC contract will cease (if you are still paying these extra contributions when you draw your benefits) although you will be able to take out a new APC contract (provided you are at least one year before your Normal Pension Age if you want to pay the APCs by regular contributions) or, subject to your employer’s discretions policy, a new SCAPC contract. If you draw your pension after your Normal Pension Age, the amount of any extra pension you have bought will be increased as its being paid later. You can choose to exchange some of the extra pension you have bought for a cash lump sum in the same way as your main LGPS pension. If you are buying extra LGPS pension by paying Additional Regular Contributions (ARCs) When you draw your pension you will be credited with the extra pension that you have paid for. This will increase the value of your retirement benefits. However, if you are paying ARCs when you retire and qualify for the type of ill health pension where your benefits are enhanced (Tier 1 and Tier 2 ill health pensions), you

Your Pension

37

will be credited with all the extra pension that you set out to buy, even if you have not completed full payment for it. If you choose to retire early and draw your benefits before age 65, or you are retired on redundancy or business efficiency grounds before that age, the extra pension you have bought will be reduced for early payment. If you draw your benefits on flexible retirement, you can, if you wish, draw all the extra pension you have paid for, although it will be reduced for early payment. If you choose to draw the extra pension on flexible retirement, your ARCs contract will cease (if you are still paying these extra contributions when you draw your benefits). You can choose to exchange some of the extra pension you have bought for a cash lump sum in the same way as your main LGPS pension. If you are buying extra years in the LGPS (Added Years) You will be credited with the extra years of membership that you have paid for and you will receive extra retirement benefits calculated on the same basis that you agreed to buy them – but see below for the rules on ill health retirement. This extra membership is worked out using your final pay when you leave and is included in your membership built up in the scheme before April 2014. For further information on how this is worked out see the section If you Joined the LGPS Before 1 April 2014. If you retire on ill health grounds whilst paying for extra years, you will normally be credited with the whole extra period of membership that you set out to buy, even if you have not completed full payment for it. If you retire early because of redundancy or business efficiency whilst paying for extra years, you will have the opportunity to pay the remaining contributions due in a lump sum in order to complete your contract. If you draw your benefits on taking flexible retirement and you elected before 1 October 2006 to commence your added years contract you will be credited with the extra years of membership that you have paid for and this will increase the value of your benefits paid on flexible retirement. If you elected on or after 1 October 2006 to commence your added years contract, you can, if you wish, choose to be credited with the extra years of membership that you have paid for at the point of flexible retirement and this will increase the value of your benefits paid. If you choose to be credited with the extra years of membership on flexible retirement, your added years contract will cease (if you are still paying these extra contributions when you draw your benefits). If you do not choose to be credited with the extra years of membership on flexible retirement, your added years contract will continue. If your benefits when you draw them are reduced for early payment then your benefits from the added years are reduced in the same way. The reduction is applied based on the Normal Pension Age applicable to benefi

a guide to the local government pension scheme for employees in england … · 2017. 11. 29. ·...

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